Consolidated Debt

How to consolidate debt

Carrying debt can be extremely exhausting and stressful, and sadly, nowadays, possibly more than ever, people are having real struggles with various types of debt. It is hard enough to battle a single financial obligation, but when are dealing with multiple bills, hope can really be hard to find. If you are trying to pay off multiple financial obligations and are desperately looking for a way to improve your chances of achieving that goal, then what you are probably looking for is debt consolidation.

What does it mean to consolidate financial obligations?

What does it mean to consolidate financial obligations?
What does it mean to consolidate financial obligations?

To consolidate means to combine. When you are dealing with more than a single financial obligation, you have a number of different bills that you need to take care of every month. Having to deal with so many payments may not only a lot of your time, trying to calculate and figure out each payment, but it can always cause you to be late with a payment or even miss one. With that, of course, come certain fees that you need to pay to continue with your financial obligations repayment process. Let’s not forget the bills for your loans are not the only thing that you probably need to think about and, therefore, to take care of. There are the regular monthly bills, as well as all the basic necessity monthly expenses. So having a number of loan bills to track can be a total disaster. By using financial obligations consolidation, you are able to combine all these separate bills into a single monthly payment. What that will give you is the chance to be able to focus only on a single monthly payment. That means that you will no longer have to keep track of all these different bills on separate accounts, but that you would only have to keep track of a single monthly payment on a single account. You can easily see how this can have a massive positive impact on your whole financial life. This, however, is not the only benefit that consolidating your multiple financial obligations may give you.

Benefits of consolidating multiple bills

Benefits of consolidating multiple bills
Benefits of consolidating multiple bills

We have already talked about the main feature that this service offers – the combination of multiple bills into just a single one. This, however, is not the only benefit that you can get from consolidating your multiple financial obligations. In fact, many people are considering this option mainly because of the following benefits:

 

  • A new, lower interest rate

 

A new, lower interest rate
A new, lower interest rate

That’s right, with financial obligations consolidation, you should be able to lower the interest rate on all your loans. As you possibly know all too well, the interest rate is one of the main reasons why it is so hard to get rid of financial obligations, especially when there are more than just a single financial obligation. So by lowering the interest rate on your bills, you will drastically improve your chances of paying off all that you owe and regaining control of your finances. Keep in mind that whether you would be able to qualify for a new, lower interest rate or not will depend on a number of factors, mainly on your credit score. If you have at least a decent credit score, you should be able to qualify for such debt consolidation without many trouble. If your credit score is perfect, even better. However, if you do have a poor credit score, you may find it quite hard to secure better terms, including lower interest rate. That in any way does not mean that getting a lower interest rate would be impossible. It just means that it is going to be a bit harder. However, today there are numerous private loan lending institutions that offer competitive terms to people with bad credit scores. So even if your credit score is not that good, consolidation may still be a pretty beneficial option for you.

 

  • Smaller monthly payment

 

Smaller monthly payment
Smaller monthly payment

If the combination of multiple bills into a single one, plus a lower interest rate, is still not enough to convince you that consolidating your multiple financial obligations may just be the thing that you are looking for, you may appreciate the fact that by using this service you would also be able to reduce your monthly financial obligations repayment bill. Everybody who has been battling multiple financial obligations will tell you that every extra dollar that you can get your hands on while going through the repayment process can have a massive impact on the overall outcome of your financial struggle. By lowering your monthly bill, you would be able to get just that, extra cash. You can use that money to stabilize your finances, take care of your other living expenses, pay your regular monthly bills, and probably most importantly make sure that you do not take out another loan while repaying the ones that you already have.

Different ways of consolidating

Different ways of consolidating
Different ways of consolidating

ou can consolidate multiple financial obligations in a number of different ways. Normally, that depends on the specific types of your financial obligations and all the other details of your financial situations. If you are dealing with multiple credit card balances, for example, you would be able to consolidate these balances with a credit card balance transfer. There are two methods for consolidating multiple financial obligations. However, those are most common with most types of financial obligations and are a go-to option for the majority of borrowers that are choosing consolidation as their way of paying off their multiple bills. These two main ways of consolidating are debt consolidation loans and debt management programs.

 

  • Debt management plans

 

Debt management plans
Debt management plans

Financial obligations management plans are quite popular and are often recommended by many financial experts. With a financial obligations management plan, you are combining your current bills into a single payment without taking out a new loan. You submit this single monthly payment to your debt management company, after which that company splits the payment among all of your creditors. The process of financial obligations management programs normally starts with a counselor meeting. This is a meeting where you get to discuss the details of your financial situation to gain valuable information about the service and your options and to determine the maximum amount of money that you would be able to afford to pay each month, based on your income and expenses. Normally, the best choice for you would be to work with a non-profit DMP agency. The job of that agency is contacting all the creditors whom you owe money to and negotiate with them on your behalf with the purpose of lowering your interest rate and getting you a smaller monthly payment. Keep in mind that if your DMP organization is able to reduce your monthly payment, that may be at the cost of extending your financial obligations repayment period. That way, you may end up paying a bigger amount of money in the long run.

 

  • Debt consolidation loans

 

Debt consolidation loans
Student loan debt consolidation debts consolidation loans

A preferred option by the majority of borrowers, financial obligations consolidation loans are a type of debt consolidation which allows you to combine multiple financial obligations and shuffle them into a brand new debt consolidation loan. That loan, of course, will come with new, hopefully, better loan terms, including a lower interest rate and a smaller monthly payment.  As mentioned before, whether you would be able to secure these lower terms on your brand new financial obligations consolidation loan will mainly depend on your credit score.

Final thoughts

The purpose of the text above is not to convince you that consolidating your multiple bills will definitely be the best option for you. It’s just to give you useful information about what this service can do for you and how it can positively impact your financial obligations repayment process. With that being said, debt consolidation is not a foolproof method, nor is it a magic trick that can make your financial problems suddenly go away. When you are dealing with such financial issues, it is important to explore and consider all the options that are available to you and to make sure that you pick the one that is best suited to meet the specific need of your current financial situation.

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